Ads make the TV world go round — so if no one’s watching them, can there still be network TV? CBS, Fox and NBC would say no, which is why they’re fighting Dish Network’s new ad-skipping software, called AutoHop. It allows viewers to completely black out ads on programs saved to their DVRs. Those three networks were scheduled to head to court today in New York City.

The three networks sued, saying the power to skip ads violates copyright laws and could mess with the whole financial model the TV industry runs on. AutoHop launched in May and can only be used for shows on broadcast networks and not cable channels, so it’s no wonder the networks feel a bit put out.

Arguments will be heard today over where the case should be held in New York or Los Angeles.

Dish says it thinks AutoHop is just fine and dandy.

“I think it was settled 28 years ago in the Betamax case,” Dish Network Chairman Charlie Ergen told Congress last week, referring to the landmark 1984 case that established that consumers did not violate copyright laws by recording shows at home for their own enjoyment.

But the almost $68 billion in ad dollars the TV industry rakes in each year is important to keeping costs down on making all those TV shows, say the networks.

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Geesh. Didn’t know they’re were only skipping network ads and not the cable channels. Don’t they have decent lawyers working for Dish Network? It’s that bit of information that will doom their channel skipping. They “might” have stood a chance if they allowed you to skip all the ads from any channel.

TiVo actually had to get rid of that? I have a 30 second jump that I use on my Comcast DVR all the time. I don’t think the standard remote has it, but I programmed it into my Logitech Harmony remote a long time ago and it has always worked just fine.

I don’t know if Dish has really thought this one all the way through. If ad revenue goes down for the networks, they’re going to start charging the cable and satellite companies the way cable channels do. If ESPN can charge $5/subscriber for 2.5 million average primetime viewers, how much do you think CBS can get for their 12 million average primetime viewers. Plus, the networks can put most, if not all of that charge, on Dish Network and claim that it’s solely in response to the loss of ad revenue from the hopper. Now, Dish customers are pissed at Dish because their local channels are costing them $20-30/month instead of $5 and start dropping Dish (which doesn’t hurt the networks since those customers will probably move to cable or start watching over the air and weren’t watching commercials anyway). I can only see this ending poorly for Dish Network.

You don’t think maybe those customers would simply stop watching network TV? I think that’s a big risk for the broadcast networks. Many people, including me, don’t have any access to broadcast TV anymore. I don’t have cable, I don’t have an over-the-air antenna. My access to broadcast TV shows is through aftermarket DVDs. I don’t think the big networks can risk making themselves less available to any viewers.

At some point you may be able to do that, the reason they just started with the major networks is that the are somehow using a not-so-automated process to mark the commercials in recordings as you don’t get to skip commercials until 7 hours after the show airs. My guess is Dish is trying to see if they can make $$ on this feature before expanding it

Next thing you know, highway billboard owners will sue car manufacturers for installing tinted windows in cars, thereby depriving them of viewing time.

Seriously, television used to be paid for through commercials, then they started charging for television, then they started the permanent station logo in the lower right hand corner, then they started the rolling advertisements right before the show went to commercial, now they advertise during the show to the point that it takes up a significant percentage of the screen.

Agreed. They don’t get it. Fighting to save interstitial commercials is a fool’s errand. For the last 15 years, consumers have begun to wake up to how bad commercials are, and I predict that over the next 15 years commercial-paid television will collapse.

There is another financial model which can work in our brave new world, and I’m ready to lay it out for you here. Get ready, because this is a shocker: people should pay for television. I know, I know, you’re saying that just because it works for movies, just because it works for every single other thing bought and sold in the entire world, it could never work for television. I’m telling you to keep your eye out, because it’s already begun (HBO, ESPM, NFL Network) and soon there will be no other choice. Consumers simply won’t be willing to watch commercials anymore.

If they offered alacarte pricing for the channels you want, I’d be all over this. As it is, its either I pay $100 for a shit load of crap and more for the few channels I want, or I suffer with the over-the-air broadcast channels we get.

There is currently a la carte pricing for individual shows. Someone has already mentioned DVDs, which is a great solution if you don’t need to watch something right away. If you do, there’s iTunes, Amazon, Zune…

Right. I have Direct TV, with something like their 250 channel line up. I don’t watch sports, religious channels, don’t speak Spanish, don’t care about Oprah and her network, or the Lifetime network, don’t shop off the TV, Whatever MTV has turned into, not a country fan, don’t have the “Premium” channels (they only play like 4 shows a bazillion times in a month). I like History, Discovery, Military, NatGeo, and about 5 other channels. Bring on the ala carte pricing!

I think that is a large part of it. They use the reason of costs to justly the increase in commercials and fees, but they don’t ever think that maybe their costs are to high. The only reason an actor is worth 100K and in some cases 1 million an episode is the revenue they bring in.

Like e-books are able to let independent authors sell directly to the customer, there is no reason why talented artist cannot produce their own shows, and put them directly online.It is already happening to some degree. They get the right balance of cost versus quality and some will be able to make a go at it. I am sure there are many great regional actors that would work for say !00K a year.

I suppose the brunt of the question should be does the ad have any value if the customer skips it manually? I don’t think so unless Ads begin to transition to 30second flashing logos so that they can be read even when being fast forwarded.

As a side-effect to this, I REALLY hate the product placement in some shows that I watch, like Bones and their annoying Prius. They’re so BLATANTLY OBVIOUS and annoying. One more reason not to buy a prius.

I remember a study (and I can’t find it now of course) that shows people who fast forward through the ads still get the brunt of the them. The gist is that people HAVE to pay attention so they don’t miss part of the show, so they still get part of the effect.

The argument here is that Dish is fiddling with content they don’t own.

On the Next Food Network Star, the product placement was all Target products. (“Oh, look how calming these lanterns from Target are”) It was cheezy as hell. And they gave away a $20,000 Target gift card! What is there at target to buy for $20,000?

Back when Alabama football coach Bear Bryant was alive, he had a weekly TV show each week of the season. He and a host opened the show with a bottle of Coke each and a bag of Lays potato chips. The host dutifully noted that the show was sponsored by Coke (both men raised the bottles to their lips and took a swig) and Lays (both men munched on a couple of chips). They’d repeat after each commercial break. It was so wooden that it was hilarious. Those were the days.

That’s the way it always was until the quiz show scandals. One company sponsored the show and they’d be plugged all the way through. via Wikipedia:

“It eventually emerged that the Twenty-One debut on September 12, 1956 had gone so badly that sponsor Geritol called producers Barry and Enright the following day and demanded changes. Under pressure, Enright and his partner Albert Freedman decided to rig the show. Jack Barry, the show’s host and co-owner of Barry-Enright Productions, was not involved in the actual rigging, but later helped in the cover-up.”

Isn’t this the sort of scenario the in-program advertising was supposed to address? The Coke and Snapple cups on the judge’s table, the gratuitous views of the car the main characters are riding in, heck, “Psych” has gotten blatant about it and mentions products by name (Skittles instead of “candy”).

Not that commercials aren’t important, but with all that back and forth mess over broadcast fees, how much damage is something like the Dish Network really going to do?

There is only one real way for any network to combat DVR/recording commercial skipping. Online streaming, like Hulu. If the networks would offer all of their content for online streaming on-demand, with un-interrupt-able commercials, it would not only curb skipping commercials, but combat piracy too. The only reason I pirate now, is because of shows that are not otherwise available.

The advertisers would also get more bang for their buck by targeted advertising. Everyone wins, except the cable TV providers.

Since timeshifting isn’t used in ad rate calculations anyway, how does this affect CBS et al? Nielsen ratings are an abstraction and, one could argue, don’t (and can’t) measure how many people actually watch the commercials.

Notice who isn’t suing? The advertisers. They know the truth that they aren’t reaching as many eyeballs as the networks claim. This is a boon for them because they can move to pay lower rates while still reaching the same number of eyeballs.

Why would the advertiser sue in the first place? All they would do is pull advertising spending from one channel and increase it on another, or reduce their ad spending.

And while advertiser and the channel providers can not measure how many people are watching commercials, the advertisers can see a decrease in brand and line awareness among consumers which tends to lead to a decrease in sales. While you will never get detail down to a granular level, you will get a general read across your target demographic.

Good point. I can just speak for myself, but if I don’t have to watch commercials, I don’t. If it’s live TV, I get up and go to the bathroom, maybe straighten up the kitchen, etc. If it’s a show On Demand, and they haven’t disabled the fast forward, I fast forward through the commercials. I’ve come across a few shows On Demand where you can’t fast forward through the commercials, and they show the same 2 or 3 commercials repeatedly for the whole hour. I just don’t watch that show, and if it is something I like, I’ll wait until it comes out on DVD.

If the advertisers think people pay strict attention to their ads, I think they’re sadly mistaken.

The problem is that the networks WANT the DVR number to count (and so do you!) It’s the ad agencies that are fighting it and this situation is giving them more ammo to keep their current stance. There are a lot of shows (Sci-Fi shows in particular for some reason) that do very well when their DVR numbers are factored in, but they end up canceled or put on Fridays, where they get even more DVR views, but fewer live views. Then they die.

I don’t agree with the way the networks are going about this (and I think, if there is ANY logic around copyright left in the judiciary, it will fail) but make no mistake: This is a BAD thing for viewers in the mid-term. People are not ready to pony up to replace the ad dollars shows generate. Would you pay $1-4 per episode for every show you like to watch? For everyone in your household?

That model is not one you want anyway, even if the answer is yes. It would encourage TV execs to take the stand that Movie execs have been taking lately: if it’s not a guaranteed hit, it won’t get made by a big studio. You would see a decline in available shows, and I doubt you would like the choices you were left with. You would end up with fewer good-but-not-smash-hit scripted shows and more cheap-but-very-popular reality crap.

HBO and Showtime can pull it off because they are only making a few shows a year, the rest of their line-up are movies that they didn’t make and don’t have to recoup production costs on, just the license fees. That model doesn’t work so well when you are talking about almost all original content.

You are right about the Dish commercial skipping being bad for viewers. Right now we have an almost perfect situation. We get our most of our shows paid for by commercials that we can easily skip. Why not leave it as it is and don’t discourage the advertisers from bolting.

Even though I skip most commercials, I do end up seeing some. I may be doing something else and don;t end up skipping, or maybe I started watching a news show or something live. The skip bottom may stop on one before the show starts again.

It’s actually a good argument. Think of it this way. You’re reading a book. It’s perfectly legal for you to skip a chapter or two if you think they’re boring, but it’s illegal for a bookstore to cut those chapters out before selling it to you.

The networks are arguing that the entire program, commercials and all, is their intellectual property. By cutting out the commercials prior to retransmission, the cable companies are illegal altering the networks’ intellectual property, thus violating copyright.

Right, but the networks have a license to distribute them. Let’s try another analogy. A company decides to put together a compilation album, so they purchase the rights to a dozen different songs. The don’t own the songs, but they do own a license to distribute those songs on that particular album. If the music store cuts out a song without the production company’s permission (imagine this is possible), they’re not violating the performer’s copyright, they’re violating the production company’s right to redistribute the song on a compilation album.

Part of advertising is that the ad company grants the network a limited use license (essentially giving the network use of its copyright) giving them the authority to air the commercial within a given set of circumstances. Just because the compensation is backward from the normal licensing process (the network is paid along with the license instead of paying FOR the license) doesn’t change the copyright implications.

“If consumers aren’t watching commercials, an alternative would be to ask them to pay for the TV time they’re watching. That sounds like something no one whatsoever would be down with.”

Reeeeeeeeeeeeeeeeeeeeeeeally?!? Must be why there’s so many hissy-fits the last few years from media companies pulling their affiliates off because they’re “not being paid enough” for carriage. So where is that money going if people aren’t paying for that TV time?

I wonder how much revenue advertising brings in per subscriber for each show?

The reason I want to know is, when I have to buy an individual show it is $1.99 per episode. If I watched 2 or three shows a night using this method it would be $120-$180 a month. The delivery method cost less than 10 cents. I would not mind paying a reasonable amount per episode, but it seem something is screwed up. There are to many hands in the jar, and the network hands want much more cookies than they get from the advertising.

When I use Amazon Prime or Netflix for the same shows it is averages out to nearly nothing at $8 a month. There is a huge discrepancy in the costs of the same shows. I think if we could just pay exactly what the Network would have received for commercials(plus some transaction costs) per subscriber,we would be actually paying something very reasonabl

I think you would be surprised by the actual numbers. The ad price info I have is from last year, but we can make some reasonable estimates. On average, a single 30-second ad costs about 4-5 cents per viewer. Sunday Night Football charges $425,000 and gets 10.214 million adults 18-49 (the only demo that matters for advertisers). Grey’s Anatomy got $225,000 and produced 5.409 million, Two and a Half men got $215,000 and produced 6.526 million. Now, these numbers aren’t perfect because ad rates are set on the previous year’s viewers, but the data is solid enough to show that networks receive 4-5 cents per viewer per ad.

Now, in a typical hour of television there will be about 20 minutes of ads (versus 40 minutes of show). This fluctuates by show and by episode, but the 1:2 ratio is a pretty good estimate. So if we estimate 5 cents per viewer per ad and with 40 ads per hour, if the network were to sell its shows only to reimburse lost advertising revenue, one hour would cost…$2, the exact cost of an iTunes download now.

Thank you, it puts everything in perspective. We actually have to pay some how. I guess what I do by using Amazon Prime or Netflix streaming is the equivalent of waiting for the book to come out in paperback.

What about the increases in commercials over the past decades? Really it is like a price increase. I think many of us would be less concerned with the commercials if they were not so damned many. If I had to watch all of them I believe I would quite watching TV, at the very least I would be more selective. Same if I had to pay $2 per episode. What we have here would be a normal price value question if not obscured by the model. Either way, watching commercials or paying $2 per episode would send me to books or maybe interacting with people more.

Broadcast TV ads have always been “skippable” – in the days before television remotes, that was the time when you went to the bathroom, got another beer, or chatted with whoever else was in the room with you…anything but just cataleptically sit and watch the commercials.

I fully understand and appreciate the issue for TV show producers…advertising is what gives them money to make the shows in the first place. For the most part, I have no issue with commercials in free, OTA programming. The consumer is getting the product at no cost other than the fact that there’s ads in it. Seems fair.

I don’t like having ads in paid-for TV, like cable or satellite. It makes no sense for me as a consumer to pay for the programming out of my own pocket, and then be subjected to commercials too. Certainly not at the same rate as OTA. And on top of that, naturally you’re forced to subsidize all kinds of crappy networks and shows you never even want because of the forced packaging business model of the paid-for TV providers.

If you’re on OTA, I think you get what you get and you really don’t have any room to complain. It’s free to you, so just accept the free programming and get on with it. Which must necessarily include the right to not just sit there and watch the commercials, whether it means flipping the channel, going to the bathroom, or fast-forwarding on your tape/DVR/whatever.

If you’re on paid-for TV, I think it’s high time that major changes were made. There’s vastly too much advertising in paid-for TV. That’s very unfair to the consumer. And the forced bundles are also exceedingly unfair. Cafeteria plan please. These are the reasons why people are leaving paid-for TV, and switching to combinations of OTA, online, and streaming services. Paid-for TV is losing.

The difference is that fast forwarding on a DVR has already been declared legal. This is a company physically altering the program it is retransmitting without the permission of either the broadcasting network or the content producer. The networks are arguing that this is a violation of their copyright rights.

Then you can skip around all you like. This is how PC based PVRs deal with commercial skipping. The process the recording, find and mark the commercial breaks, and just automatically skip over the offending material.

“If consumers aren’t watching commercials, an alternative would be to ask them to pay for the TV time they’re watching. That sounds like something no one whatsoever would be down with.”

Except we are ready paying for it.

Remember all those squabbles with WABC TV and other stations with Time Warner and other cable companies over carriage fees? When watching over a cable or satellite provider I am already paying a fee to that cable/sat company for the privileged to watch station on my cable system.

Most of that fee goes to the local affiliate, not the parent network (unless the parent owns the affiliate in question). Even if it did all go back to the parent network, it would be a drop in the bucket compared to their ad revenue.

That analogy almost works. What it misses is if Dish is ‘the music store’, Dish is not cutting or editing anything that they agreed to show. They are giving the viewer (purchaser of the music compilation) the choice to not see everything that is broadcasted. Consumers decide whether they want to skip commercials, Dish just provides the technology to do it. More analogous would be that a music store sold a music player that let the consumer listen to only the songs they wanted to listen to, regardless of the songs compiled on the album. That would be a mp3 or cd player that lets you program your playlist. Dish lets viewers cut the commercials out of their watch list.

I am still using my ReplayTV DVR that has a great commercial skip that works well over 95% of the time perfectly. And yes the broadcasters and cable companies sued ReplayTV as well. When DirectTV took them over the commercial skip never saw the light of day. Looks like the Hopper is short for this world too.